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The Top 10 Challenges of Operating A POS business

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POS Business

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Since its inception, the POS business has gained widespread recognition and acceptance due to its contribution towards alleviating the stress that individuals go through when it comes to sending and receiving cash. Instead of having to queue in line for several hours, with your ATM card, you could easily make withdrawals and transfers through a POS machine.

Concurrently, the Inter-Bank Settlement System (NIBSS) is concerned about the failure rates of transactions using POS terminals since it presents a huge challenge to both the cashless policy and financial inclusion efforts by banks and Financial Technology companies (A.K.A. fintechs.)

Without a doubt, the number of POS businesses in Nigeria is rapidly increasing, but then, just like every other thing, operating a POS business in Nigeria has its own challenges. Let’s take a look at some of the most important issues to consider — both to you and to your customers.

Challenges Of POS Business

1. Network issues

This is a common situation in every POS terminal. At least, 20 out of 30 Nigerians have experienced this. In the worst cases, one would have to wait for at least, 20 minutes for the network to come back to normalcy and start processing transactions again. This can cause frustration for both parties especially the operator when there are many customers to attend to. However, based on our findings on a sampled population in the southwestern part of Nigeria, we can conclude that the issue of network downtime has been overcome to a very large extent, particularly among the Fintechs. This feat effectively translates to increased transaction success rates.

To further equip POS operators in combating this problem, the fintech companies, Opay and Moniepoint, now have a transaction monitoring tool built into their POS machines. This tool allows POS operators to check the success rates of inter-bank transactions such as Inter-bank Transfers, Utility bills, and Airtime, at any given point in time.

2. Fraudulent machine operators

Adhering to the Payment Card Industry Data Security Standard (PCI DSS) is essential for businesses managing payment card information. In almost any country, violating these standards by storing sensitive data such as PINs can lead to severe legal and financial consequences. However, we have encountered instances where POS agents make unauthorized withdrawals from bank accounts at any time and for any amount. Using a POS machine carries significant risks, as fraudulent machines can be employed to illicitly copy card details. Although in most cases, PINs are not directly stored on these machines, the presence of surveillance cameras in certain locations can be exploited to maliciously obtain your card’s PIN.

3. Susceptibility to Armed Robbery

POS agents are a top target for petty criminals, often leading to the theft of cash deposits. The robbery of POS agents is rampant in developing areas, contributing to the overall risk associated with ATM and POS terminal operations.

4. Delay in the reversal of money

This occurs when the card of the person making the withdrawal is debited and the reimbursement is delayed.

POS operators are still dealing with this problem. Many have stopped using POS agents as a result of fear of the delay in the reimbursement process.

5. High cost of service

Customers often consider POS operator charges exorbitant. For this reason, people would normally prefer to make use of ATMs provided by banks as it is way cheaper. We have seen cases where customers of POS operators were charged between 10% – 20% of the withdrawn amount. Notably, during Nigeria’s cash crises shortly before the presidential election of 2023. After the elections, fees did not elastically go down as many POS Operators still kept their charges high.

6. Virus & Malware

The POS machine can even be infected with Malware. Although this rarely happens, it is still a real possibility.

7. Hardware-related issues

It’s tough to repair the hardware in web-based POS systems. Despite the fact that you may be able to contact the manufacturer for assistance in troubleshooting the problem, you may still need a costly and time-consuming visit from a service technician to resolve the issue and resume business as usual.

8. Difficult Customers

Dealing with and handling POS customers alone is difficult. You will definitely encounter people who will show up with malfunctioning cards or cards with insufficient funds, claiming to have credit, resulting in a waste of time. If you intend to operate a POS business, please be prepared to accommodate and possibly deal with such people.

9. Poor Revenue Due To Oversaturation

Due to the mass population of POS agents throughout every street in Nigeria, locating an area with a low level of competition can be a daunting task. This is because you don’t want to cite your POS stall in an area with a lot of existing POS operators. Should you decide to go ahead, you should be prepared to fight for customers daily. Nonetheless, it is vital to be strategic in your positioning.

10. Dishonest Staff

Staff are the spine of most businesses. A dishonest staff is a cankerworm that is ready to eat deep into your investment, not minding whether or not you make a profit. Unfortunately, you are more likely to suffer from this when operating a POS business. If your stall is located in a place where the crime rates are high, you would need to be very careful whom you employ. Although being careful is never enough, you’ll need good luck as well.

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